Swiss government to allow financial institutions to self-regulate greenwashing

The government has said Swiss financial institutions can regulate greenwashing policies themselves, a move welcomed by industry leaders but criticized by climate advocates.

Federal Council he said in mid-June was pleased with the industry self-regulation provisions as they took into account many of the government’s positions, such as the implementation of requirements for defining sustainable investment objectives and the requirement for an independent third party to conduct an audit.

However, the Swiss Government noted that “there remain unresolved issues”, including compliance with EU law and the acceptable reference framework for the SDGs and feasibility.

Although the self-regulation rules will come into force in 2027, the Federal Council indicated that it would reassess its decision once the EU had completed the amendment Sustainable Finance Disclosure Regulation (SFDR). Although Switzerland is not part of the EU, it is part of the single market, which means most EU rules apply to the confederation.

The announcement puts a pause on a debate that began in 2022, when the government proposed legislation to tackle greenwashing and misleading practices but the financial sector opposed it, arguing it should be able to self-regulate.

Asti Roesle, senior project manager at Klima-Allianz Schweiz, said the Swiss government had caved to the financial sector and the decision was “completely disappointing and shows once again how powerful financial lobbies maintain control over Swiss government and politics.”

The three main industry leaders in Switzerland – the Asset Management Association, the Swiss Bankers Association and the Swiss Insurance Association – welcomed the decision of the Federal Council, saying in a statement: joint statement that “they consider self-regulation to be the most appropriate instrument to avoid greenwashing.”

However, Stephan Kellenberger, deputy head of sustainable finance at WWF Switzerland, questioned the gap between the government’s position and the association groups, as “the Federal Council clearly states that it is considering (self-)regulation. It does not support it and clearly states that there are some unresolved issues.”

He said self-assessed regulation would not change the status quo and would ultimately lead to more greenwashing. He noted that self-regulation can make a difference when combined with regulatory oversight, but “it cannot fill the gap in the lack of government regulation.”

Uuriintuya Batsaikhan, head of research at Positive Money, said self-regulation generally has very limited effects. As the world transitions to a greener economy, there will be more side effects, including greenwashing.

“Strong regulations have to go hand in hand (with the green transition),” she said. “You can’t have a stable table without legs.”

She added that there is intentional greenwashing, but also a lot of unintentional greenwashing in financial markets. Strong regulation helps distinguish the two, but “self-regulation will blur the lines even more.”